Nvidia Beats Earnings, Inflation Rises, GDP Growth Revised Higher

Matthew Rubin Chief Investment Officer

 

1. Nvidia beat earnings forecasts and raised its sales outlook, showing that AI demand is still strong.
2. Core PCE inflation ticked slightly higher in July, but markets continue to expect rate cuts next month.
3. The U.S. economy grew faster than initially reported, with upward revisions tied to consumer spending and a surge in AI-related investment.

 

1. Nvidia Posts Strong Earnings, a Sign that AI Demand Has Held Up

Nvidia reported quarterly earnings last week that exceeded Wall Street expectations, highlighting sustained demand for artificial intelligence. Adjusted earnings per share came in at $1.05 compared to the $1.01 forecast, while revenue reached $46.74 billion, slightly above the $46.06 billion estimate.¹ The company issued guidance for the current quarter of $54 billion in sales, a target that would indicate growth above 50% for the tenth consecutive period.¹

Nvidia’s stock trajectory remains in the spotlight after the company became the first to surpass a $4 trillion market cap, with over $1 trillion added this year alone.¹ The chipmaker now accounts for 8% of the S&P 500, raising questions about whether the index can sustain record highs if the stock stalls.¹ Analysts note that, while Nvidia stock may not see substantial gains in the near term, the broader market’s performance, for the rest of 2025, is likely to depend more on Federal Reserve rate decisions than on AI-related momentum.

2. Inflation Edges Higher as Fed Eyes September Policy Meeting

Inflation rose modestly in July, according to the Commerce Department’s report last week on the personal consumption expenditures (PCE) index. Core PCE, which excludes food and energy, climbed at a 2.9% annual rate, its highest since February and slightly above June’s pace.¹ On a monthly basis, core prices rose 0.3%, matching forecasts.¹ The broader PCE index increased 2.6% year-over-year and 0.2% since June.¹

The Federal Reserve targets a 2% inflation rate, and the latest data remains above that threshold. However, the figures are in line with expectations, which is likely to keep attention focused on labor market softness. Fed Governor Christopher Waller said last week that rate cuts remain likely in September, with the size depending on whether job market weakness deepens.

3. U.S. GDP Revised Higher in Second Quarter on Strong Spending and AI Investment

The U.S. economy expanded outpaced initial estimates in the second quarter, according to revised data released last week by the Commerce Department. Gross domestic product rose at a 3.3% annual rate, higher than the prior 3.0% estimate and economists’ expectations of 3.1%.² The revision adds about $20 billion to output, driven by stronger consumer spending and higher investment in areas such as software, healthcare facilities, and intellectual property.²

Economists noted that software spending grew at its fastest pace since 2007, underscoring the role of artificial intelligence in supporting business investment.² Consumer spending on healthcare, pharmaceuticals, and travel also exceeded earlier estimates, even as households faced lingering tariff effects.

With the update, U.S. GDP averaged 1.4% growth in the first half of 2025, slower than the 2.5% pace seen in 2024.² Nevertheless, low unemployment and resilient consumer demand continue to anchor economic momentum despite softer job growth.

For the period ending 8/29/25.
* Small-cap stocks are represented by the Russell 2000^® Index. International stocks are represented by the MSCI EAFE. Bonds are represented by the Bloomberg US Aggregate Bond Index. Oil is represented by WTI Oil (West Texas Intermediate Oil), a benchmark for light, sweet crude oil and a primary measure for pricing oil contracts and futures in the U.S.

Sources
¹ CNBC
² The Wall Street Journal

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